Dennison Corporation has provided the following information:

Direct Materials $6.00 per unit

Direct Labor $3.00 per unit

Variable MOH $2.00 per unit

Sales Commission $1.00 per unit

Variable Administrative expenses $0.50

Total Fixed MOH $10,000

Total Fixed Selling and administrative expenses $5,000

5,000 units were produced and 4,900 units were sold. There was no beginning inventory.

ANSWER THE FOLLOWING QUESTIONS

1. What is the unit product cost under variable costing?

2. What is the unit product cost under absorption costing?

3. Which method of product costing will show a higher net operating income under the circumstances above, and by how much?

4. Explain how you arrived at your answer.